Tài liệu Session 5 - Cost management doc

LA TROBE UNIVERSITY – HANOI UNIVERSITYGRADUATE SCHOOL OF MANAGEMENT MBA CLASS: Project Management - Session 8: Procurement Management Version 2.0 2 Project cost management definition • P

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LA TROBE UNIVERSITY – HANOI UNIVERSITY

GRADUATE SCHOOL OF MANAGEMENT

MBA CLASS 4: Project Management Version 2.0

1

MBA CLASS 4

Subject Profile: PROJECT MANAGEMENT

Session 5

On completion of this Session, you will

be able to:

1 Prepare project budgeting

2 Develop costs scheduling & project

accounting

3 Define cost control plans

ACTIVITIES:

̇ Lecturing

̇ Reading for comprehensive: Estimated cost of a designed project

̇ Group discussion: Cost scheduling and control

̇ Presentation: Estimates cost of the new project

Home exercise: Monitoring procedure and quality measurable standards for the

new project

̇ Assessment: Self-assessment

LEARNING TOOLS

̇ PMBOK Guide

̇ Lecture notes

̇ Sample of project estimated cost

̇ Assignment material

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GRADUATE SCHOOL OF MANAGEMENT MBA CLASS: Project Management - Session 8: Procurement Management Version 2.0

2

Project cost management definition

• Project cost management is the process of estimating, base-lining and controlling the cost of a project

Implem FINAL

Design&

develop.

Concept INITIAL

Resource planning Estimating cost Base lining cost Controlling cost

1 Project cost estimating

3

Estimating project costs

• Estimating project cost is the process of determining the cost for each resource needed to complete project activities

Design&

develop.

Concept INITIAL

Magnitude estimate

Budget Estimate

Definitive

Source: ACPM

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Estimate quality

The quality of any estimate will depend on a good understanding of:

̇ The time constraints of the project

̇ The estimating supporting mechanisms

̇ The currency of market information provided

̇ The clarity and accuracy of the project scope

̇ The skills and experience of the estimator

̇ Previous projects with similarities

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Estimating project cost requirements

• Work breakdown Structure (WBS)

• Resource requirements

• Resource rates

• Activity duration estimates

• Historical information

• Chart of accounts

Descriptions

̇ WBS: Used to organize the cost estimates and to ensure that all

identified work has been estimated

̇ Resources rates: the unit rates (staff cost/h, bulk material cost/m

etc) for each resource

̇ Activity duration estimates: this may affect finance, tax and

interest costs which may need to be included in the overall of the

project

̇ Historical information: (Previous project results; estimating

database etc.)

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̇ Chart of accounts: describes the coding structure used to report

financial information The project estimates must be assigned to

the correct accounting category

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Estimating cost elements

• Insurance

• Materials

• Management

• Plant&Equipment

• Fees&Taxation

• Contingency

• Inflation

• Labor

• Transport

• Sub-contract

• Overhead &

administration

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Direct and overhead costs

PROJECT COST

Usage (work effort) x

Cost per use or Hourly cost

DIRECT COSTS

OVERHEAD COSTS Project office

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7

Estimating costs mechanisms and

tools

• Top-down estimating model

• Bottom-up estimating model

• Cost models

• Software modeling tools

Methods’ descriptions

“Top-down estimating” model

̇ That uses the actual cost of similar projects as the basic for

estimating the cost of the current project

̇ This cheap method is used to estimate total project costs when

there is limited information about the project,

̇ Requires expert experience and judgment

“Bottom-up” model

̇ Summaries the individual estimates of project items to get total

project cost

̇ Is more accurate when smaller work items are used

Cost model

̇ Use the costs of project parameters (like m, m2, m3 etc.) to predict

project costs

̇ This method is simple but required accurate data

Software modeling

̇ Uses computerized tools/spreadsheets

̇ Allow rapid many alternative and accurate estimates but depends on

quality of software and experiences of estimator

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2 costs budgeting/baseline project costs

8

Project cost budgeting

Project cost budgeting (or base-lining project costs) is the process of

allocating estimated costs against project activities and agreeing stakeholders on the cost baseline for measuring cost performance

9

Base-lining project costs requirement and tools

• Cost estimates

• WBS

• Project schedule Requirements

• Based-lining project costs mechanism Tool

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2.3 Project cost baseline

GRADUATE SCHOOL OF MANAGEMENT

MBA CLASS: Project Management - Session 8: Procurement Management

Version 2.0

10

Project cost baseline

• Plant & Equipment

• Fees &Taxation

• Overhead & administration

Implem FINAL

Design&

develop.

Concept INITIAL

Cost performance baseline

$ (cum)

Time S-Curve

̇ Based-lining project costs involves the allocation of costs across

the time (or fiscal) periods in which the project will be conducted

̇ Cost is not incurred at a steady rate that is why it is inaccurate to

allocate costs on a straight line, it typically like a “S-curve”

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3 Controlling project costs

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Controlling project costs

Controlling project costs is the process of:

• Influencing factors which create changes to the cost baseline to ensure the changes are beneficial.

• Determining that the cost baseline has changed

• Managing the actual changes when and as they occur.

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Controlling project costs

requirements

• Project cost baseline

• Cost performance report

• Change requests (increasing/decreasing budget)

• Project cost control plan

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3.2 Controlling mechanisms and tools

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Controlling project costs mechanisms and tools

• Change control procedure: Defines

procedures for changes to cost baseline

• Planning update: refined estimates

analysis of alternatives

• Performance measurement: Assess

magnitude of variance and determine corrective action Earned Value Analysis

• Software: Project management software,

Spreadsheets

̇ EV is a tool for monitoring both cost and schedule

̇ EV is the dollar value of the actual work done at the budgeted cost

rate

̇ EV is also known as Budgeted Cost of Work Performed (BCWP)

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3.4 Project cost variance (CV)

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Project cost variance (CV)

CV is the difference between what we said it would cost and what is actually has cost

CV = BCWP * – ACWP **

**ACWP – Actual cost of work performed

̌ The project is under or over budget

̌ If the EV is greater than actual cost, the project is on average under budget

̌ If it is less, it is on average over budget

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Project Schedule variance (SV)

SV is the difference between what we said

we would do and what we have actually done

SV = BCWP – BCWS***

̌ The project is early or late

̌ If the EV is greater than scheduled cost, the project is on average early

̌ If it is less, it is on average late

***BCWS - Budgeted Cost of Work Scheduled

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3.6 Controlling Project Cost deliverables

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Controlling Project Cost

deliverables

• Revised cost estimates

• Budget updates

• Corrective action

• Estimate at completion

• Lessons learned

Descriptions

̇ Revised cost estimates are modifications to the cost information used

to manage the project

̇ Budget updates are special category of revised cost estimates Budget

updates are changes to an approval cost baseline

̇ Estimate at completion is a forecast of total project costs based on

project performance

Tiêu đề	Project cost management
Trường học	La Trobe University – Hanoi University
Chuyên ngành	Project Management
Thể loại	Course material
Thành phố	Hanoi

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Số trang	11
Dung lượng	161,39 KB